Mercer Study: Reform Global Pension Systems or Pay a Price

Aging populations and rising costs of living around the world make prioritizing many pension systems a high priority, otherwise more and more citizens will end up reaching retirement age unable to fully finance themselves, a new study finds.

The Melbourne Mercer Global Pensions Index comparison of 18 national pension systems found that Denmark has the best pension system in the world, followed by the Netherlands and Australia. The United Kingdom came in seventh place and the United States trailed in ninth, meaning London and Washington have public and private reforms to push through.

“You’ve got to look to the future for the next 30, 40, 50 years … the younger generation have the pressures on them of debt, loans and house prices but if money is not put aside now, they won’t have money for their retirement. It’s that simple,” David Knox, a senior partner at Mercer and author of the report, told CNBC.

“Now is the time to reform, to continue to reform. As the [Organization for Economic Cooperation and Development] says, no country is perfect, every country needs to continue to reform its pension system,” he added.

Others agree that fiscal reforms are needed in the United States, especially when it comes to unfunded liabilities, namely future healthcare and Social Security costs.

A solution will likely involve cutting costs and raising taxes if the country is to avoid a Greek-like fate, said Bill Gross, founder and co-chief investment officer of bond giant Pimco.

“If we continue to close our eyes to existing 8 percent of [gross domestic product] deficits, which when including Social Security, Medicaid and Medicare liabilities compose an average estimated 11 percent annual ‘fiscal gap,’ then we will begin to resemble Greece before the turn of the next decade,” Gross wrote in his October Investment Outlook.

“Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the [Federal Reserve] would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the ‘Ring of Fire.’”

Aging populations and rising costs of living around the world make prioritizing many pension systems a high priority, otherwise more and more citizens will end up reaching retirement age unable to fully finance themselves, a new study finds.